Atlantic City’s Debt Downgraded Again

The view of both the Revel and Showboat casinos from the Atlantic City beach in June. Published Credit: Ryan Collerd for The Wall Street Journal

Atlantic City’s bond rating was downgraded once again Wednesday, reflecting the continuing struggles of a seaside town that is straining to recreate itself as its gambling business wanes.

Moody’s Investors Service knocked the city’s debt down to Ba1—or junk-bond level—citing the city’s “weakened tax base, revenue-raising ability and broader economic outlook.” It is the second Moody’s downgrade for the city in the last nine months.

Atlantic City joins Harrison, Irvington and Salem as New Jersey cities rated below investment-grade, according to a Moody’s spokesman.

Re-energizing Atlantic City has been a priority for Gov. Chris Christie, who created a five-year revitalization plan for the city soon after taking office in 2011. But the city’s fortunes have been hit by several casino closures, along with decreased gambling revenue—$2.86 billion last year, down from more than $5 billion in 2006.

The city’s $15 billion tax base is 68% reliant on gambling, according to Moody’s, which added that regional gambling competition from other states is likely to increase pressure on the city.

The agency also said further casino tax appeals could damage the city’s standing. Three different casinos—the Revel, along with the Showboat Atlantic City and Trump Plaza Hotel and Casino—could close by year’s end. City officials hope to find a buyer for the gleaming Revel, which opened in 2012, and Atlantic City Mayor Don Guardian said Wednesday there are six potential buyers. It will be auctioned next month.

Atlantic City officials are trying to promote non-gambling tourism, and the Moody’s report noted that economic-diversification efforts remain a “long-term and ongoing task.” The city is touting a new Bass Pro Shops store, along with boardwalk concerts and special events.

Moody’s also credited Atlantic City with its plans to curb expenses through 2016.

Still, Moody’s said it expects the city’s high debt burden to increase, and that the state’s disappointing online-gambling revenues have hurt the city’s fortunes.